A Darling of Product Companies

If Gurgaon has attracted call center companies, Chennai has
attracted transaction-processing players; research companies have thronged
Bangalore, and Hyderabad has demonstrated its attractiveness to the companies
that want to set up IDCs (India Development Centers). Oracle, Microsoft,
Motorola, Qualcomm, Convergys, and Computer Associates (CA) are some of the
leading players that have created large development centers in the capital of
Andhra Pradesh. Some of the new product companies to set up their development
centers in Hyderabad include Quantum, a storage company.

According to a theory, most companies, including Microsoft, were
impressed by the fact that out of the total IT professionals present in the US,
about 25% were from Andhra Pradesh. Also, one out of every four Indians in
California is from the state. According to another interesting piece of data, at
one point of time, more than 50% of students in Victoria Universitys Masters
in Computer Science program were from Andhra Pradesh. Back home, around one lakh
people in Andhra Pradesh are involved in the IT industry, one way or the other.

Santanu Paul, senior vice president and head of Global Delivery
Operations, Virtusa Corporation, whose company, Virtusa, helped Convergys start
its product development through the BOT model, however, thinks that Hyderabad
has a good mix of ITeS, product, and IT services companies.

The Early Movers

Oracle, which had established its first India Development Center (IDC) in
Bangalore, in 1994, opted for Hyderabad when it decided on expansion. The Oracle
Hyderabad center was set up in 1998 to focus on some of the newer areas of
creating ebusiness applications. Murali Subramanian, group vice president,
Oracle Application Development helped set up the Oracle IDC in Hyderabad. The
Bangalore and Hyderabad development centers form the largest group of developers
outside Oracles global headquarters in Redwood Shores, California.

Incidentally, Microsofts IDC (MSIDC) was set up in the same
year. From a mere 20 people, it has grown to 1,300. Talking about the choice of
Hyderabad, Srini Koppolu, corporate vice president and managing director of the
MIDC and the man instrumental in setting up the facility from scratch, says,
"We were not concerned about some of the things like electricity, as we had
thought that wherever we decided to set up, these things would be offered by the
government in power in that place. The big driver was how it would be for
employees and their families living and leading their day-to-day lives."
Microsofts sprawling campus is spread across 42 acres.

The Chandrababu Factor

There is no denying the fact that the Hyderabad of today is the result of
futuristic thinking on the part of former chief minister Chandrababu Naidu, who
put Andhra Pradesh on the IT map of the world.

Despite all the criticism of the laptop-totting former chief
minister, there is no denying the fact that Naidu set the ball rolling once he
convinced Microsoft to come to Hyderabad. Many companiesmost of them product
companiesmade a beeline for Hyderabad after Microsoft and Oracle had set up
their operations in the city.

Naidu had made his intentions known when he prevailed upon
authorities to complete the Cyber Towers at HITEC City in record fifteen months,
a city landmark that originally housed companies like Microsoft. (Microsoft has
since moved to its own campus in Gachibowli)

It was Naidu who established Indias first Department of
Information Technology (DoIT) in the country, in the state of Andhra Pradesh,
way back in 1997. Other states, including Karnataka, followed by according
importance to IT by appointing a separate secretary to look after the IT
development in the state.

After Naidu demitted the office of chief minister, owing to a
disastrous defeat at the hands of the Congress party led by YS Reddy, the entire
IT community felt as if they had been orphaned. However, the Congress government
led by YSR Reddy has continued the policies of the previous regime. The
incumbent chief minister has also managed to get some of the new projects like
Fab City into Hyderabad.

Other Driving Factors

The presence of Microsoft and Oracle in Hyderabad has influenced other
companies, which have set up or are toying with the idea of setting up their
centers in the city. These two companies have created a development ecosystem in
the city that has been complemented by companies like Covergys, CA, and others.

According to Ravi Kollipara, director, Quantum India Development
Center, which is the latest member to join the IDC club, "We did a lot of
research before zeroing in on Hyderabad. It has a growing talent pool, which is
good for the future growth of the companies that have set up their operations
here. Besides, there is a good base of talent pool with specialization in
storage and the technologies we work on."

There is consensus on the advantage that Hyderabad has in terms
of infrastructure. Says Lokesh Jindal, senior vice president and general
manager, India Technology Center, Computer Associates, "We could clearly
see Bangalore becoming congested and infrastructure had started to give in at
that time. Infrastructure in Hyderabad, on the other hand, was reasonable and
the attitude of officials and the government was positive, which prompted CA to
finally set up operations here."

Narrating Convergys entry into Hyderabad, Paresh Shah,
managing director, Convergys Information Management India, says, "Convergys
started the maintenance work from Hyderabad through some third parties before we
decided to leverage and grow that into our own center and reap the benefits of
what India had to offer. We moved into a new facility in March 2004 and have
grown to around 1,400 people."

Shah is all praise for the local government of Andhra Pradesh.
He also thinks that the existence of product companies in Hyderabad was an added
incentive.

Out of Hyderabad

Oracles center houses developers who are responsible for building and
expanding the capabilities of Oracles business applications software. This
includes leading edge applications used by customers to manage core business
processes and drive performance such as financials, human capital management,
manufacturing, supply chain, sales and marketing. The team also develops
applications that meet the needs within specific industries such as financial
services, healthcare, higher education, and public sectors.

MSIDC has end-to-end responsibility (development, testing and
program management) of more than fifty Microsoft products, features or
technologies shipped to a global clientele. They own the strategy; gather
customer requirements from across the world; create multi-version release plans;
architect, design, test and release the product in the market. For other
Microsoft products, the teams collaborate with their peers in Redmond. MSIDC has
filed around 180 patents in the last three years.

Convergys, which is largely seen as a contact center player in
India, offers a variety of services out of its IDC in Hyderabad. These services
include software development (design, development, testing and implementation),
maintenance support, and professional services for Convergys information
management, customer care and employee care businesses. CA, on the other hand,
does actual R&D, quality assurance, and sustaining engineering support. It
also has a team that does internal application development for Global
International System Organization. Not only bigger companies, but also smaller
companies are setting up their IDC centers in Hyderabad.

The Way Ahead

Despite having a growing product development hub in Hyderabad, India still
constitutes less than 2% of the total product development ecosystem. One only
hopes that with some of the players like Oracle, Microsoft, and Convergys
providing the initial boost, product development will gather momentum. According
to Srini Koppolu of Microsoft, "We have created a culture of product
development, which was non-existent in India." Microsoft and Oracle have
proved the point, others need to follow suit.

Sudesh Prasad

sudeshp@cybermedia.co.in